How Much Does Your Doctor Really Make?

The U.S. government released payment data for 880,000 physicians this week—to widespread misinterpretation. What the numbers can actually tell us.

Everyone can finally see what doctors are charging and being paid by the government. After nearly 35 years of legal suits and battles, this week, U.S. Centers for Medicare and Medicaid Services released payment data detailing how much doctors are reimbursed by Medicare, the healthcare service for people disabled or at least 65-years-old. Medicare deputy administrator Jonathan Blum wrote that he hoped the release of data will serve the public interest "by increasing transparency of Medicare payments to physicians ... and shed[ding] light on Medicare fraud, waste, and abuse."

While the records contain a lot of useful information, particularly for identifying potentially fraudulent billing practices, early media coverage has also created some confusion about what these numbers actually mean.

The massive data set includes $77 billion in Medicare payments to over 880,000 doctors. (Though, the data only covers payments in 2012 and only for Medicare Part B—the portion of Medicare that pays for things like x-rays, chemotherapy treatments, doctor's office visits, etc.—and excludes payment for hospital visits, prescription drugs, or private insurance.)

It quickly came to light that nearly 4,000 physicians were paid over $1 million from medicare in 2012. This includes Salomon Melgen, an ophthalmologist from Florida and the latest whipping boy for high-profile medical fraud. In 2012 Melgen received nearly $21 million from Medicare—64 times the average in his field. Put another way, that's more than Lebron James' NBA salary, right?

Not really. Even if we ignore the $9 million in fraud that he is currently being investigated for (and will likely lose), and if we ignore the $700,000 in super PAC money he donated to support New Jersey Senator Robert Menendez (who is also now facing a federal probe for potentially interfering to protect Melgen), and if we ignore the likely fortune he must have paid to get the former head of the Justice Department's Medicare fraud task force, Kirk Ogrosky, to be his attorney—Melgen was never getting close to that $21 million.

This is not salary information. Medicare reimbursements do not simply go straight to doctors, but instead must also be used to pay the costs associated with the treatment. The $2,000 drug (Lucentis) that Melgen infamously exploited cost roughly $1800 to obtain from the pharmaceutical manufacturer, Genentech. Somehow the pharmaceutical and medical device companies have quietly escaped much of the blame as the public picks apart the physician's final bill. Talk about killing the messenger.

Of course Melgen is being prosecuted for lying about dosages that he gave in order to quadruple charge Medicare for a single dose, which is clearly fraud. However, especially for most doctors who are not frauds, it is a mistake to look at the final Medicare payout and assume that these doctors are all running away with government money.

Yet somehow people seem fixated on figuring out which specialties get paid the most by Medicare, with ophthalmologists, radiation oncologists, and cardiologists getting the most hostile attention. The New York Times and Washington Post have provided online tools that allow people to track their physician's by name and location without much guidance on how to interpret the payment totals.

These approaches to looking at the new payment records suffer three major flaws.

Medicare payments are not profit; the money often must be split amongst other physicians, nurses, and specialized support staff in addition to paying for actual drugs and medical devices. Think of it like paying for a meal at a restaurant--even though the waiter serves you the food, he's not taking home the whole bill for himself. An analysis by The Washington Post estimates that only 23 of the 4,000 "Medicare millionaires" are likely to actually keep at least $1 million in profit after all the other mouths are fed. Several outlets have posted that oncologists receive the highest average payments at nearly $365,000 per physician. This is misleading, given that over 80 percent of Medicare payments to radiation oncologists go to office overhead. Without knowing what procedures cost, seeing how much doctors are being reimbursed does not tell us enough about their incentives or whether they're delivering efficient care.

It's also critical to remember that, in addition to omitting "costs," this data only includes Medicare patients (i.e. patients predominantly 65 and older). Income doctors receive from private insurance (or other forms of public insurance besides Medicare Part B) is completely absent. So if two doctors see the same number of patients, and one of them has a greater proportion of Medicare (older) patients, that doctor will appear to be paid much more in this dataset because only Medicare patients are included. Is it any wonder then that many of the high payment totals go to specialties which treat "age-related" afflictions, such as eyesight (ophthalmologists) and cancer (oncologists)? Pediatricians are near the bottom of the charts.

Maybe most concerning, little of this information is useful without considering some measure of patient outcomes. When deciding how much is "too much" to pay my surgeon, I consider it relevant whether most of his patients leave the operating table alive and well, for example. If a doctor treats me well, I'm happy for her to earn more, within reason. A lack of data on outcomes and patient satisfaction undermines declarations that this new data will allow patients to make better choices about which doctors are performing best.

There are still some genuinely good uses for the data. At seventh on the list of top reimbursed physicians is David Fata, who is currently under arrest for accusations that he intentionally misdiagnosed patients in order to deliver and charge them for unneeded chemotherapy. Corrupt physicians are more easily identified with this data. Payment records can also expose the kinds of behaviors that are simply unreasonable to explain away (for example, billing for more procedures in a day than is physically possible). In addition, seeing which doctors perform certain procedures more frequently could inform one's decision before a major surgical operation (research shows that doctors that perform certain surgeries with increasing frequency become less likely to make fatal mistakes). Unfortunately, performing a lot of the same procedures is also being used to demonize physicians for being greedy or duplicitous rather than efficient and experienced. Short of extreme cases, it's not always possible to know which scenario is correct.

Such is the curse of this data. We can't go back. This release is a good first step towards transparency in healthcare costs, but it's not enough on its own. These records' strength will lie in their combination with other data sources (e.g. those with info on outcomes, costs, or private health records). It's like we've discovered a valuable ancient text, but don't yet have the Rosetta Stone to translate it fully. While we wait for more information to trickle in, it's important not to misinterpret or dramatize the results.